This is the blog of Ahmed Limam, providing insight and intelligence on international business and technology, HR, politics, travels, movies, history, literature and any other human endeavor worth bothering about

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Monday, January 9, 2012

Why Wall Street and the City are beyond salvation

What about "Save the People?
After all, financiers have only
themselves to blame for the
crisis they inflicted on themselves
and the rest of the world

RIO DE JANEIRO
I have been a keen reader of The Economist for a good quarter-century. I have always loved their writing style and irreverent humor, even the rigor it often brings to its analyses. I am less keen when it unashamedly behaves as the mouthpiece of big business and banking giants, as it does in this week's cover story and leader whose title is the self-explanatory "Save the City."

In one of its headersThe Economist wonders why “Strangely,
California doesn’t talk down Silicon Valley”. Why would it? Silicon Valley companies
produce computers and software that consumers and companies (often) love and use. What
have the City and Wall Street offered ?(And how come The Economist doesn’t ask
itself why “Not Strangely, the United States DOES talk down Wall Street”?)

The Economist
claims that financial markets “funnel savings to their best use”. Oh, really? How can the
subprimes be considered as best use? How can the real estate bubble be
considered best use? How can the various pyramid schemes be considered best
use? How can the taxpayer-bailouts be considered best use? How can the encouragement
to governments to spend beyond their means and create the problems we are
seeing now be considered best use? How can helping Greece to cook its books (as
Goldman Sachs did) be considered best use? How can ruining millions and sending
many more into unemployment while the pigs gorge themselves at the trough be
considered best use?

Whichever
way you look at it, financiers are parasites, living off the body they attack
and sucking it dry until they move somewhere else. It is time we get rid of
them. If the management of money is so critical to society, like defense, justice and
the rule of law, then just as we do with these areas let’s nationalize/highly regulate it so
that finance can truly serve the people and not the other way round.

The argument
that Britain should hang on to this industry just because it is a big
contributor to GDP is flawed: there are some countries where the mafia and drug
cartels create as much wealth. Should we then legalize them? “But these are
criminal enterprises,” you might say quite shocked. Well, someone prove to me
that financial services companies are less criminal.

“China and
India have underdeveloped financial markets; Britain has the expertise,” writes The Economist. If I have any advice to give these emerging economies it is to remain
underdeveloped with respect to financial markets. They don’t need to import our
current mess a few years down the road, with all those hedge funds and derivatives and CDO's which nobody understands. The reason nobody understands them is the point: the less consumers understand the financial products offered to them, the easier it is for the banks to fleece them.

As for "Britain’s expertise," the Chinese
and Indians would be well advised to say, “thanks, but no thanks.” I remember when, at the height of the financial crisis in 2008, the governor of the Czech Central Bank was asked how his country escaped the turbulence. He explained that years back when those risky products appeared, Czech bankers came and asked him whether they should invest in them. "Do you understand what these are made of?" When they replied in the negative, the governor then advised them not to invest in products they didn't have a clue what they were about. And he was damn right as his country's bank sailed through the crisis.

Time to get back to basics and produce real products and real services that people really need.

(The blogger is currently in Brazil whose banking system, in spite of its being more regulated than the U.S. or British banking industry, has many faults, concentration being one of them. I am also worried at the high amount of credit being freely distributed at Shylock-like interest rates to new, undiscerning consumers. When the day of reckoning comes, and some bubbles burst, Latin America's largest economy will be in a lot of pain.)

About the blogger

A global business and HR technology expert, I live in Paris,France where I was born, after stints in North Africa, the US (where I went to college), Spain (where I worked for the UN) and Brazil (my second home during my freelance years.) A strong believer in the dual role of HR and cloud technology to enhance corporate performance, these convictions are voiced in journal articles, at conferences and in blog posts. My hobbies include swimming, movies and literature. I am also the proud author of "High-Tech Planet", a rare business novel set in the IT industry (available from Amazon: http://amzn.to/czf0qw.) A relentless multilingual globe-trotter, you can see a sample of my detailed captioned pictures at http://bit.ly/dBcJkw. To quote Charlemagne: "to have a second language is to have a second soul." I also NEVER TAKE THINGS AT THEIR FACE VALUE. Challenge the received wisdom and go beyond first impressions: you'll be amply rewarded - that's my philosophy.
I can be reached at: contact@AhmedLimam.com.
NOTE: The thoughts expressed in this blog reflect my own, personal views not those of any of my employers, current or past.